LEGISLATIVE COUNSEL'S DIGEST

Existing law provides for the furnishing of utility services by public utilities, as defined, subject to the regulatory authority of the Public Utilities Commission, including the supplying of natural gas service by gas corporations.

This bill would authorize the commission to authorize a gas corporation to procure zero-carbon gas, hydrogen, as defined, or low-carbon hydrogen, as defined, to serve customers or for another purpose stated in an application filed by the gas corporation. The bill would authorize a gas corporation to recover in rates the
reasonable cost of pipeline infrastructure developed to deliver and transport the zero-carbon gas. or low-carbon hydrogen. The bill would require the gas corporation to deliver any of that hydrogen procured from producers to end users through the pipeline system. The bill would authorize the State Air Resources Board, the commission, and the State Energy Resources Conservation and Development Commission to authorize the production of zero-carbon or low-carbon hydrogen for end uses. The bill would require zero-carbon or low-carbon hydrogen delivered to an electrical generating facility or end user through a common carrier pipeline or interstate pipeline to comply with specified requirements.

Digest Key

Vote:
MAJORITY
Appropriation:
NO
Fiscal Committee:
YES
Local Program:
NO

Bill Text

The people of the State of California do enact as follows:

SECTION 1.

The Legislature finds and declares all of the following:

(a) California is the nation’s second largest user of petrogenic natural gas, comprising nearly 10 percent of the entire national consumption. This natural gas comes from a variety of basins, with over 90 percent of the natural gas used in the state being imported from locations across the southwestern United States, the Rocky Mountains, and western Canada before being transported through more than 100,000 miles of pipe to over 11 million end users in
this state.

(b) Replacement of petrogenic natural gas by zero-carbon gas or low-carbon hydrogen can provide measurable climate benefits and will not only allow a more diverse portfolio of fuels to serve end users, but also provide a source of native or in-state gas production.

(c) California’s gas ratepayers have invested billions of dollars in building and maintaining a vast network of natural gas infrastructure.

(f) As California transitions to a zero-carbon energy future, it is imperative that this transition be executed in the least disruptive and most cost-effective way to maximize the benefits to both California’s residents and the environment.

SEC. 2.

Section 2775.7 is added to the Public Utilities Code, to read:

2775.7.

(a) The commission may authorize a gas corporation to procure zero-carbon gas or low-carbon hydrogen to serve customers or for another purpose stated in an application filed by the gas corporation.

(b) The commission shall require a gas corporation that procures zero-carbon gas or low-carbon hydrogen to deliver the zero-carbon gas
or low-carbon hydrogen from producers to the pipeline system and transport the zero-carbon gas or low-carbon hydrogen through the pipeline system to end users.

(c) A gas corporation may recover in rates the reasonable cost of pipeline infrastructure developed to deliver zero-carbon gas or low-carbon hydrogen to the pipeline system and transport zero-carbon gas
or low-carbon hydrogen through the pipeline system to end users.

(d) The State Air Resources Board, the commission, and the Energy Commission may authorize the production of zero-carbon and low-carbon hydrogen for end uses, including, but not limited to, all of the following:

(1) Transportation fuel.

(2) Serving gas customers.

(3) Generation of electricity and electrical grid services.

(4) Long-duration energy storage.

(e) In determining the reasonableness of costs for any end use of zero-carbon
or low-carbon hydrogen or in performing a cost analysis for inclusion of zero-carbon or low-carbon hydrogen in any program, the State Air Resources Board, the commission, and the Energy Commission shall consider all benefits of zero-carbon or low-carbon hydrogen in addition to the underlying cost of the zero-carbon or low-carbon hydrogen commodity.

(f) Zero-carbon or low-carbon hydrogen delivered to an electrical generating facility or end user through a common carrier pipeline or interstate pipeline shall comply with one or more of the following requirements:

(1) The hydrogen is used by an onsite generating facility.

(2) The hydrogen is used by an offsite generating facility and delivered to the generating facility through a dedicated pipeline.

(3) The hydrogen is delivered to a generating facility through a common carrier pipeline or interstate pipeline and meets both of the following requirements:

(A) The source of hydrogen injects the hydrogen into a common carrier pipeline or interstate pipeline that physically flows within California or toward the generating facility for which the hydrogen was procured under the original contract.

(B) The seller or purchaser of the hydrogen demonstrates that the manufacture and injection of hydrogen into a common carrier pipeline or interstate pipeline directly results in at least one of the following environmental benefits to California:

(i) The reduction or avoidance of the emission of any criteria air pollutant in California.

(ii) The reduction or avoidance of pollutants that could have an adverse impact on waters of the state.

(iii) The alleviation of a local nuisance within California that is associated with the emission of odors.

(d)

(g) For purposes of this section, “zero-carbon gas”
the following definitions apply:

(1) “Eligible renewable energy resource” has the same meaning as defined in subdivision (e) of Section 399.12.

(2) “Low-carbon hydrogen” means gaseous or liquid hydrogen that is produced using electricity that is not necessarily traceable to electricity generated by an eligible renewable energy resource and that is not generated or directly delivered by a fossil fuel, and that meets one or both of the following criteria:

(A) Is produced from water by a process using electricity.

(B) Is produced from feed stock that does not contain carbon, as determined by the State Air Resources Board, in consultation with the commission and the Energy Commission.

(3) “Zero-carbon hydrogen” means a gas gaseous or liquid gas hydrogen
that is produced using electricity generated by an eligible renewable energy resource and that meets one or more both of the following criteria:

(1)

(A) Is produced from water by a process using electricity.

(2)Is produced by photosynthesis or photoelectrolysis.

(3)

(B) Is produced from feed stock that does not contain carbon, as determined by the State Air Resources Board, in consultation with the commission and the State Energy Resources Conservation and Development
Commission.